Facts of the Case

The assessee filed his return of income on 07.11.2017 declaring total income of ₹5,09,040/-.

The Assessing Officer observed a difference of ₹3,25,75,640/- between credits in Axis Bank accounts and sales/turnover declared in the return. Based on information flagged as “high risk” on the Insight Portal, notice under Section 148 was issued on 31.03.2021.

The assessee did not file a return in response to notice under Section 148. Notices under Section 142(1) were issued along with questionnaire. Since there was no compliance, show cause notice under Section 144 was issued. No response was received.

The Assessing Officer completed assessment under Section 144 and made an addition of ₹3,25,75,640/-.

The assessee filed appeal before the CIT(A). The learned CIT(A) dismissed the appeal ex-parte without passing a speaking order on merits.

Issues Involved

  1. Whether the reassessment under Section 148 based on Insight Portal information was valid.
  2. Whether assessment under Section 144 passed ex-parte without adequate opportunity was sustainable.
  3. Whether CIT(A) erred in passing an ex-parte appellate order without adjudicating grounds on merits.
  4. Whether non-passing of a speaking order violates Section 250(6) of the Income Tax Act.
  5. Whether principles of natural justice were violated.

 

Petitioner’s Arguments

  1. The appellate order was passed ex-parte despite reasonable cause for non-compliance.
  2. The assessee had expired on 15.03.2024; therefore, proceedings could not be properly pursued.
  3. The reopening under Section 148 was based solely on incorrect Insight Portal data without independent application of mind.
  4. Bank credits reported were factually incorrect and verifiable from bank statements.
  5. One bank account allegedly considered did not belong to the assessee.
  6. No defects were pointed out in audited books of accounts.
  7. Addition was made without rejection of books under Section 145(3).
  8. The assessment order and appellate order were contrary to law and principles of natural justice.

 

Respondent’s Arguments

  1. Information flagged as high-risk on Insight Portal.
  2. Non-compliance by the assessee to notices issued under Sections 148 and 142(1).
  3. Justification of best judgment assessment under Section 144.
  4. Dismissal of appeal by CIT(A) due to lack of prosecution.

Court Order / Findings (ITAT Allahabad)

  • Grounds No. 4 to 10 were argumentative in nature and did not raise distinct legal issues.
  • The core issue was lack of reasonable opportunity before both AO and CIT(A).
  • The Assessing Officer completed the assessment ex-parte.
  • The CIT(A) failed to pass a speaking order on merits as required under Section 250(6).
  • Section 250(6) imposes a statutory duty upon CIT(A) to pass a reasoned and speaking order.

The Tribunal held that:

  • Principles of natural justice require adequate opportunity of hearing.
  • The appellate authority must adjudicate each ground raised.
  • Ex-parte orders without reasoned adjudication cannot be sustained.

Accordingly:

  • The order of CIT(A) was set aside.
  • The matter was restored to the file of the Assessing Officer.
  • Direction was issued to pass de novo assessment order in accordance with law after providing reasonable opportunity to the assessee.
  • Appeal allowed for statistical purposes.

 

Important Clarification

  1. Registration of appeal requires adjudication on merits; dismissal for non-prosecution without reasoning violates Section 250(6).
  2. A “speaking order” is mandatory for appellate authorities.
  3. Even where assessee fails to respond, the appellate authority must examine merits.
  4. Restoration for de novo assessment does not decide issues on merits.
  5. The decision reinforces adherence to procedural fairness in reassessment proceedings.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770888522_PAWANKUMARKASAUDHANLHPOONAMGUPTASULTANPURVS.ITOSULTANPUR2.pdf

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